Energy costs in retail will continue to rise

A look at the status quo in the refrigeration throws Ljiljana Rakita, EHI Retail Institute.

Especially for food retail, energy is a very important issue. Even though the increase in costs in the last year was something lower than in previous years, energy is still one of the biggest cost factors. For the past few years, energy costs in retail knew only one way, namely upward, the majority of retailers in 2012 was able to record stable energy costs compared to last year.

After a long period of energy costs moving in only one direction – namely up – a majority of retailers were able to record stable energy costs in 2012 compared to 2011. This is revealed in a study on energy management in retail conducted by the EHI Retail Institute last year. Retailers attribute this condition primarily to the very nominal increase in the EEG reallocation charge from 3.53 cents per kW in 2011 to 3.59 cents per kW in 2012. The extremely low buying price for electricity in 2012 was an additional factor that had a positive impact on the situation.

Thanks to this stability, energy costs per square metre of sales area increased only minimally last year, so that they remained at approximately the same level as in the previous year. When one looks at the development of energy costs over time, however, a gradual annual increase becomes apparent. Current statements regarding the global development of energy costs, as well as institutional and legal conditions, lead one to speculate that this increase will continue in coming years. Annual energy costs (electricity, gas, heating oil, etc.) for the non-food retailers surveyed amounted to an average of approximately EUR 32.95 per square metre of sales area, representing an increase of EUR 2.11 per square metre of sales area since this data was first compiled in 2009. In food retail annual energy costs came to an average of EUR 56.25 per square metre of sales area, which represents an increase of EUR 4.65 since 2009.

Refrigeration in Food Retail

Reducing costs and increasing profitability is a decisive factor in food retail, just as in any other business. The food retailers surveyed by EHI are placing an especially high priority on measures to optimize energy efficiency in the area of refrigeration, which – at 41 % – clearly accounts for the largest portion of energy consumption. The expansion of service areas, including growing offerings in items that require refrigeration and convenience products, as well as the continued expansion of dairy and deep-frozen goods, have led to an expansion of refrigeration areas in many stores. This trend promises to continue, which will inevitably lead to an increased focus on energy-saving projects in the area of refrigeration.

There is a multitude of possible measures that would reduce energy costs related to refrigeration, starting with those that are relatively easy to implement, such as proper stocking of refrigeration equipment, periodic maintenance, and the correct placement of the equipment in the room, and continuing to more cost-intensive measures such as covering the refrigeration equipment.

In a recent study, the EHI Retail Institute has investigated the energy management in the retail sector.

Covering of Refrigeration Equipment

Various calculations show that glass lid chest freezers use up to 50 % less energy. Adding glass doors to refrigerated shelves can save up to 35 % on energy costs. One would think that retailers would be happy to invest in these covers. And in fact covered cooling zones (via lids, doors, night blinds etc.) are standard items for the retailers surveyed. By contrast, only about one half of the retailers surveyed are using covers for their normal refrigeration, and that only in a few pilot stores rather than chain-wide.

One might ask why this is so. Covering is still a sensitive topic, since it obstructs the open, sales-promoting display of the goods. Many retailers fear that covers will adversely impact the customers' inclination to purchase refrigerated or frozen goods. This fear is especially prevalent in regards to dairy products and other fast-moving consumer goods. Those responsible for energy costs at the retail companies, who are committed to increase energy efficiency, find themselves in a dilemma with the sales and marketing departments, who fear a loss in revenue.

Moreover, the retailers see the complicated use and increased difficulty in stocking the refrigeration equipment as a disadvantage for employees.

40 % of the companies surveyed by EHI have made the decision to also include covering for all normal refrigeration in any new construction or renovations. These companies have had studies conducted by polling institutes or within the framework of master's theses to determine the effect of covering. The results indicate that the companies were not able to record any revenue losses. On the contrary: The response from customers is quite positive, since the covers contain the cold, enabling the customer to comfortably remain in front of refrigeration equipment for longer periods of time, and the equipment is neater, creating the impression of an increased quality of goods.

In the view of the companies that have decided to include covering for normal refrigeration, the advantages far outweigh the disadvantages. In summary, the following advantages are named:

No leakage of cold air

Longer dwelling time near refrigeration equipment

Impression of increased quality of goods

Less disarray in the refrigeration equipment due to less movement of the goods

More elegant appearance of the store

Symbol of the company's environmental consciousness

The more complicated use during stocking of the refrigeration equipment is named as a disadvantage.

The comparison makes it obvious: Open refrigeration equipment is always a compromise between buying incentive and energy efficiency. Energy losses are often accepted so that customers have easy access to goods. In everyday practice it is important to find a balance between sales-promoting display, the required product-specific temperature and timely energy efficiency.

Given the increasing energy costs, the climate change and the shift in environmental consciousness among consumers, there appears to be no way around covers. It is likely also only a question of time until relevant legal regulations will be put in place. The revenue-loss argument will automatically become obsolete when all companies begin covering their refrigeration equipment. All that is needed here is a handful of bold pioneers to take the first step and lead the way.

Refrigerants

In the case of cooling devices, retailers generally choose those that fulfil modern standards regarding the energy footprint and the type of refrigerant used. Environmentally friendly refrigeration is continuously gaining importance due to the climate change.
The retailers in Germany, Austria and Switzerland that participated in the EHI survey have chosen the following refrigerant combinations for all future new constructions and renovations:

43 % will be using R-744 for deep freeze and R-134a for normal refrigeration

26 % will continue to use conventional refrigerants, especially R-404a and R-134a

Here it is important to note that discounters were not included in the survey. The high percentage of natural refrigerants can also be explained by the fact that while the use of R-744 has been widespread particularly in Switzerland for several years now, it is still relatively rare in Germany.

by Ljiljana Rakita, Work Group Energy Management of EHI Retail Institute